Eni wants to sell all of Jangkrik?s gas here
Tuesday, February 17 2015 - 10:30 AM WIB
Gas from Jangkrik field in the Muara Bakau PSC which is operated by Italian firm Eni SpA will be entirely sold on the domestic market, according to a senior official at the Ministry of Energy and Mineral Resources.
"Because the domestic gas price is quite good now, Eni has told us they do not need to export the LNG. " Director for Oil and Gas Upstream Management at the ministry told Naryanto Wagimin Petromindo.com.
He did not specify the domestic gas price. Industrial sources however said following the sharp drop in oil price, LNG price, which is traditionally linked to the crude price in Asia (linked to the ICP price in Indonesia), has been falling. For instance, LNG price sold on the domestic market has dropped to around $7 now from above $12 per mmbtu last year. In comparison, pipe gas sold on the domestic market, which is not linked to the crude price and was always cheaper than the LNG price in the past, remains unchanged at between $7 to $9 per mmbtu, more expensive than the LNG price.
According to Naryanto, following the approval of its POD, Eni has been trying to find buyers of its gas abroad, but the efforts have thus far brought no results, while the construction of the project is still in progress.
?The project is still on schedule,? he added.
The gas from Jangkrik will be turned into LNG at the Bontang LNG plant in East Kalimantan.
Meanwhile, an industry source told Petromindo.com that the governent has yet to official receive Eni?s proposal regarding the allocation of the entire gas of Jangkrik for the domestic market.
"Thus far, it is just a topic of informal discussion. In fact, until now there isn?t yet any agreement regarding the price of Jangkrik gas that has been allocated for the domestic market. The price is very important," the source said.
The source said Eni found the domestic market quite interesting in view of the current price. ?The project is developed based on the oil price assumption of $100 per barrel, meaning it will be economical if the crude price stays at $100 per barrel. And the fact is that the project is now in the middle of construction process,? the source added.
Under the initial Plan of Development, 70 percent of the gas from Jangkrik in the form of LNG will be exported, with the remaining 30 percent to be sold on the domestic market to meet the gas needs of power plants and industries in East Kalimantan, Java, South Sumatra, central Sumatra, North Sumatra and Aceh. Last year, SKK Migas and Eni agreed to raise the domestic market portion to 47 percent.
Production at the Muara Bakau PSC in the Makassar Strait is projected to start in the first quarter of 2017, according to SKK Migas.
The Muara Bakau PSC comprises of two major gas projects namely the Jangkrik project and the Jangkrik North East project (JNE). The first is estimated to have a production rate of 300 mmscfd, while the second 150 mmscfd.
Editing by Johannes Simbolon